Why Your Home-Based Business Needs Its Own Insurance Policy — Cut the Guesswork

1. Short answer: yes, you probably need separate insurance for your home-based business. The longer answer is messy and full of small-print landmines. If you make things, sell services, invite clients into your home, or keep inventory, treating your business like a hobby in the eyes of your insurer is a risky way to save a few bucks. 3 Key factors when picking insurance for a home-based business Think of insurance choices like tools in a toolbox. You want the right tool for the job, not the cheapest one that sort-of works. When evaluating options, focus on these three things: Scope of coverage - Does the policy cover liability claims, your business property (stock, tools, equipment), and professional mistakes? Some policies cover one thing but not others. Limits and cost of defense - A $100,000 limit sounds fine until legal fees eat half of it on day one. Know whether defense costs are inside the limit or paid in addition. Policy exclusions and triggers - Read the exclusions: vendor sales, client visits to your home, classes you teach, or products you ship might be excluded. Also note whether coverage applies only at your home, or also at markets, client sites, and online sales. In contrast to picking a streaming plan or a new coffee maker, insurance choices carry real legal and financial consequences. That makes those three factors non-negotiable. Relying on homeowners insurance: Pros, cons, and hidden risks Many people assume homeowners insurance will cover their occasional business activity. It might — sort of — but relying on it is like using a bandage for a fracture: better than nothing, but not truly adequate. What homeowners policies commonly cover Basic liability for accidents that happen on your property, like a client slipping on the porch, may be covered under the personal liability portion. Limited coverage for personal property used for business is sometimes included. Typical limits are small, often a few thousand dollars at most. Where homeowners insurance usually falls short Most homeowner policies include a business activity exclusion or limit. If you're running a consistent business, an insurer can deny a claim or refuse renewal. Professional liability (errors and omissions) for advice-based businesses is not covered. Product liability for goods you manufacture or sell is often excluded or severely limited. If a client sues you over something related to your business, the home policy may refuse to defend or pay damages. On the other hand, if your business is truly incidental - like selling a few handmade items at a garage sale once a year - your homeowner policy might be sufficient. The problem is most home-based businesses are not “truly incidental” and cross the line into regular commerce, which the insurer did not sign up for. How dedicated business policies differ from homeowners coverage A dedicated business policy is created with the assumption that the insured is running an operation. That changes everything. In contrast to homeowner coverage, business policies are written to handle commerce-related exposures. Common types of business insurance for small home-based operations General liability - Covers third-party bodily injury and property damage. If a customer trips over a display and breaks a leg, this is the policy that steps in. Business property - Covers inventory, tools, and equipment used in the business. Limits are higher than the tiny amounts a homeowner policy might offer. Professional liability (errors and omissions) - Important for service providers like consultants, designers, or therapists. Covers claims of negligence or poor advice. Product liability - Critical if you make items sold to others; it covers harm caused by a defective product. Business owner's policy (BOP) - A package that bundles general liability and property coverage, often cheaper than buying both separately.

2. Similarly, modern insurers offer microbusiness products geared to crafters and solo entrepreneurs. These target specific risks at lower cost and with simpler signup processes. In contrast to homeowners insurance, these policies clearly state they're protecting a business. That reduces the chance of a denied claim on the grounds that the insurer never agreed to cover commercial activity. Umbrella, event, and niche insurance: Which extra options make sense? Not all insurance needs must be met with a full BOP. There are additional viable options depending on how you run your business. Event or market insurance - If you sell at craft shows or fairs, short-term policies for a single day or weekend can be inexpensive and effective. Microbusiness or crafter liability - Teamed-down policies for makers that provide general liability and product liability at low annual premiums. Commercial umbrella - Adds excess liability limits above your primary policies; useful if you could face large jury awards. Commercial auto - If you deliver goods using a personal vehicle, your personal auto policy may not cover business use. Workers' compensation - If you hire assistants or employees, state law might require coverage even for small teams. On the other hand, some options are overkill. If you only sell a handful of items yearly, a full commercial package might be unnecessary. In contrast, if you stock inventory, teach workshops, or have clients come to your home regularly, the extra protection is worth the premium. Cost realities and why cheap liability options for crafters matter Let’s speak plainly: money matters. For craft businesses operating on thin margins, the idea of "cheap liability" is attractive. But cheap does not mean useless. There are tailored, priced-right options for crafters: Pay-as-you-go event policies: $20-100 per day, depending on limits and location. Annual microbusiness liability policies: often $100-400 annually for basic general and product liability at modest limits. Higher limits and bundled BOPs cost more but protect against catastrophic legal defense bills. Think of cheap liability policies like seat belts: they don't prevent accidents, but failing to use one makes a bad outcome far more likely. A small annual premium can save you thousands if a product claim or client injury occurs. What happens if a client sues me — and who pays the legal bills? When a client sues, paperwork starts quickly: a complaint, service of process, and a deadline to respond. Here’s the typical playbook and how different policies respond. Step-by-step: a simplified lawsuit path Plaintiff files a complaint and serves you. You notify your insurer and provide the complaint. The insurer decides whether the claim is covered. If covered, the insurer usually assigns an attorney to defend you. Discovery, depositions, motions, and possibly trial. Legal fees pile up fast. Settlement or judgment. The insurer pays up to the policy limit, minus any deductible, and may handle settlement negotiations. If your homeowners policy contains a business exclusion, it can refuse to defend or indemnify you for business-related claims. That leaves you personally responsible for defense costs, settlements, and judgments. In contrast, a proper general liability policy will defend you and pay damages up to the policy limit, sparing your personal assets in most cases. Similarly, professional liability issues (bad advice, missed deadlines, negligent service) require an E&O policy. Without E&O, those bills land squarely on you. Choosing the right insurance strategy for your home-based business Here’s how to decide, using practical categories. Consider where you land and compare options using the three key factors (scope, limits/defense, exclusions). If you’re a hobbyist selling rarely

3. Option: Rely on homeowners policy for occasional, low-risk sales. Why: Minimal exposure, low inventory, no clients visiting. Watch out: If sales ramp up, call your insurer. They may require you to add a rider or switch policy types. If you sell products regularly, ship items, or sell at markets Option: Buy a microbusiness or product liability policy, or a BOP if you have significant inventory. Why: Product risks and inventory loss exposure. Event insurance for market days is a useful add-on. Limits to consider: $300,000 to $1,000,000 general liability; product liability may require higher limits if products could cause serious harm. If you provide professional services, advice, or classes Option: Professional liability (E&O) plus general liability. Why: General liability handles accidents; E&O covers mistakes in your services. Compare: In contrast to general liability, E&O focuses on financial harm from errors. If clients visit your home or you run workshops Option: BOP or general liability plus extended property coverage. Why: Increased chance of bodily injury claims and higher exposure for on-premises incidents. Also evaluate: Whether your homeowner policy excludes business-related claims involving visitors. Practical tips to make the right call Read your homeowner policy’s business exclusion. Don’t rely on verbal assurances from an agent — get it in writing. Document your operations: product lists, sales receipts, and workshop attendance. That data helps insurers price coverage accurately. Shop multiple quotes and compare not only price but also whether defense costs are inside the limit or separate. Start small if needed: event or microbusiness policies can be a cost-effective bridge while your business grows. Consider an umbrella policy if you could face large jury awards or have significant assets at risk. Analogies to keep this simple Insurance is not a one-size-fits-all sweater. Imagine running a food cart while wearing a winter coat that keeps snow out but melts under heat. A homeowner policy is that coat: fine for cold weather, not built for the heat of commerce. Dedicated business insurance is designed for the environment you operate in. In contrast, cobbling protections together increases the chance of a tear right when you need coverage most. Final word — don’t wait for a lawsuit to teach you this lesson Being cheap now and uninsured later is an expensive plan. If you value your savings, business reputation, and personal assets, get the right cover. For many crafters and solo entrepreneurs, a modest annual https://thinkingoutsidethesandbox.ca/how-to-make- sure-you-buy-and-install-the-best-sliding-windows/ policy or per-event insurance provides peace of mind and keeps a single accident from ruining months or years of hard work. If you want, tell me about your business: what you make or do, how often you sell, whether clients come to your home, and where you ship. I can point you to the most relevant coverages and the limits you should consider, without the insurance-speak.